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Car Loan Affordability Calculator

Find out exactly how much car you can afford based on your monthly budget.

function calculateCarAffordability() { var monthlyPayment = parseFloat(document.getElementById('monthlyPayment').value); var downPayment = parseFloat(document.getElementById('downPayment').value) || 0; var tradeIn = parseFloat(document.getElementById('tradeIn').value) || 0; var annualRate = parseFloat(document.getElementById('interestRate').value) || 0; var months = parseInt(document.getElementById('loanTerm').value) || 0; var taxRate = parseFloat(document.getElementById('salesTax').value) || 0; if (monthlyPayment > 0 && months > 0) { var monthlyRate = (annualRate / 100) / 12; var loanAmount = 0; if (monthlyRate === 0) { loanAmount = monthlyPayment * months; } else { loanAmount = monthlyPayment * (Math.pow(1 + monthlyRate, months) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, months)); } var upfront = downPayment + tradeIn; // Formula to reverse calculate price including tax: // Total Price = (Loan + Upfront) / (1 + TaxRate) var totalPrice = (loanAmount + upfront) / (1 + (taxRate / 100)); var taxAmount = totalPrice * (taxRate / 100); document.getElementById('resLoanAmount').innerText = '$' + loanAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resUpfront').innerText = '$' + upfront.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resTaxAmount').innerText = '$' + taxAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resTotalPrice').innerText = '$' + totalPrice.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resultBox').style.display = 'block'; } else { alert('Please enter a valid monthly budget and loan term.'); } }

Buying a car is one of the most significant financial decisions you will make. Instead of looking at the sticker price of a vehicle, most financial experts suggest starting with your monthly budget. Using a Car Loan Affordability Calculator helps you reverse-engineer the math, starting with what you can actually afford to pay each month and working backward to find the total vehicle price.

Understanding the 20/4/10 Rule

A common benchmark for vehicle affordability is the 20/4/10 rule. While this calculator lets you input any numbers, following this rule can help ensure long-term financial stability:

• 20% Down Payment: Aim to put at least 20% down to avoid "gap" situations where you owe more than the car is worth (being underwater).
• 4-Year Term: Try to limit your loan term to 48 months (4 years). While 72-month or 84-month loans result in lower payments, you will pay significantly more in interest.
• 10% of Income: Your total transportation costs (including loan payment, insurance, and fuel) should not exceed 10% of your gross monthly income.

Key Factors That Impact Your Affordability

1. Interest Rates (APR)

Your credit score is the primary driver of your interest rate. A difference of just 2-3% in your APR can change your purchasing power by thousands of dollars. Always check your credit score before shopping for a car loan to see which tier you fall into.

2. Loan Term Length

The "loan term" is the number of months you have to pay back the loan. Longer terms reduce your monthly payment, which might make a more expensive car look "affordable." However, longer terms mean you pay more in interest over the life of the loan and are at higher risk of negative equity.

3. Trade-in Value and Down Payment

These act as "instant equity." The more you can provide upfront, the less you need to borrow. This reduces your monthly interest charges and protects you if you need to sell the car early.

The Hidden Cost: Sales Tax and Fees

Many buyers forget that the "out-the-door" price includes state sales tax, registration fees, and dealer documentation fees. Our calculator accounts for sales tax to give you a more realistic "Total Car Price" estimate. If you live in a state with 7% sales tax, a $30,000 car actually costs $32,100 before other fees are applied.

Example Calculation

If you have a $450 monthly budget, a $5,000 down payment, and a 60-month loan at 6% interest, you can afford a car priced at approximately $26,400 (assuming a 7% sales tax). If you reduce the term to 48 months to save on interest, your affordable car price would drop to roughly $22,600.